CPI inflation data to offset markets

India's Nov CPI Inflation reached a 24-month low at 3.63 per cent YoY vs 4.20 per cent YoY in Oct. The data is driven largely by lower than expected food prices. Core inflation (ex. petrol, diesel, and precious metals) decelerated 4.67 per cent in Nov from 4.80 per cent YoY in Oct.

In short, the CPI index contracted in Nov which had risen in Oct. On the other hand, a step contraction in food prices was observed, which was largely driven by vegetables and pulses. Food prices surprised on the downside in Nov, contracting by 0.66 per cent MoM in Nov vs a rise of 0.29 per cent MoM in Oct.

On a sequential basis, decline was led by vegetables (-6.02 per cent MoM vs +0.33 per cent MoM in Oct) and pulses (-0.29 per cent MoM vs +0.35 per cent MoM in Oct) and fruits (-0.45  per cent MoM vs -1.03 per cent MoM in Oct).

 Firming of prices was seen in cereals (+0.77 per cent MoM in Nov vs +0.46 per cent MoM) and eggs (+1.38 per cent MoM vs -0.23 per cent MoM in Oct). Fuel and light increased by 0.56 per cent MoM in Nov vs 0.16 per cent MoM in Oct, driven by higher LPG and kerosene prices.